Isegoria

The Economist calls Jean-Claude Biver the salesman of the irrational:

Once a year, at his farm overlooking Lake Geneva, Jean-Claude Biver makes cheese. He uses milk collected only during the brief few weeks when the Alpine meadows on which his cows graze are in flower. The milk is heated over an open fire made with hand-cut wood, the cost of which alone exceeds the price most cheese would fetch. He leaves it to age all summer. This painstaking process yields five tonnes a year, but he cannot bear to sell a gram of it.

If Mr Biver changed his mind, he could probably name his price. His cheese can send the authors of Michelin guidebooks into rapture; Switzerland’s best chefs regularly call him begging for some. But he parcels it out only to family and friends, and to restaurants that he particularly likes. And he always refuses payment for the stuff. “If I don’t sell it,” explains Mr Biver, “then I will decide who gets it and who doesn’t. I will be the master of my cheese until the last piece.”

Oddly, Mr Biver is also a talented salesman. At Hublot, a watchmaker that he has run since 2004, sales are down by only 15% this year — a considerably better performance than Switzerland’s luxury-watch business as a whole, which has seen sales slump by about 30%. Hublot’s sales increased more than fivefold between 2004 and 2007, a record that enticed LVMH, a luxury-goods conglomerate, to buy the firm last year.

Hublot’s success stems in part from Mr Biver’s penchant for rationing his products. He was careful to restrict supply when business was booming, delivering only seven watches, say, when ten were ordered. Jewellers pay cash for stock, so it seems foolish not to sell as many watches as possible. Yet for Mr Biver it is an essential strategy. “You only desire what you cannot get,” he says. “People want exclusivity, so you must always keep the customer hungry and frustrated.”
[...]
Keeping inventories tight is a strategy Mr Biver refined in 1981 after he and a friend bought the rights to the name Blancpain — all that was left of a firm that had once supplied watches to divers in the American navy but had gone out of business in the 1970s. Two things attracted him to the brand: it claimed to be Switzerland’s oldest watchmaker and it had missed out on the technological revolution of quartz timers powered by batteries.
[...]
Mr Biver developed a new, backward-looking slogan for the firm: “Since 1735 there has never been a quartz Blancpain watch. And there never will be.” It turned out to be an industry-changing move. Last year mechanical watches accounted for 70% of the value of Swiss watch exports. A decade after restarting Blancpain, Mr Biver sold it for SFr60m ($43m) to the Swatch Group, having initially paid SFr22,000.

Biver is responsible for the resurgence of Omega too:

Although Omega had made the first watch taken to the moon, it had become something of a national joke by the 1980s. Mr Biver’s approach was pure marketing. He pioneered techniques that would seem commonplace now, such as product placements in James Bond films and celebrity sponsorships. Under his leadership Omega’s sales almost tripled.

Simon Johnson argues that Buffett’s big investment in railroads is a polite way to bet against the dollar:

When China finally gives way to market pressure and appreciates 20–30 percent, their commodity purchases will go through the roof. You can add more land, improve yields, or change the crop mix of choice (as relative prices move), but it all has to run through Mr. Buffett’s railroad.

Of course, Buffett is nicely hedged against dollar inflation — this would likely feed into higher inflation around the world, and commodities will also become more appealing.

And Mr. Buffett is really betting against the more technology intensive, labor intensive, and industrial based part of our economy. If that were to do well, the dollar would strengthen and resources would be pulled out of the commodity sector — the more “modern” part of our production is not now commodity-intensive.
[...]
By betting on commodities, Mr. Buffett is essentially taking an “oligarch-proof” stance. Powerful groups may rise to greater power around the world, fighting for control of raw materials and driving up their prices further. As long as there is growth somewhere in emerging markets, on some basis, Mr. Buffett will do fine.

(Hat tip to Tyler Cowen.)

Lean manufacturing helps companies survive recession, USA Today reports:

Sealy is among thousands of manufacturers that have remained profitable during the recession by using a practice called lean manufacturing to become more cost-efficient. It entails making each widget in an uninterrupted flow, rather than as part of unfinished batches; producing only what customers order; and ruthlessly chopping billions of dollars in inventory.

We used to call that just in time inventory. There is more to lean though:

Bed assembly has been streamlined at every turn. Before, mattress makers asked workers in carts to fetch raw materials from mammoth shelves 100 feet away, sometimes causing delays.

Top panels and side borders were made with no coordination. As a panel spilled off a long conveyor, a dedicated “match-up” worker grabbed it and sifted through mounds of borders to find its mate. In the course of a day, workers spent hours “hunting and pecking,” says plant manager Ricky Johnson. Employees cranked out as many units as they could to ensure colleagues down the line had sufficient materials. They were paid based on the number they produced.

Today, raw materials are arrayed neatly a few feet from quilters and mattress makers. Workers hew to a precise schedule that reflects orders from retailers such as Mattress Discounters or Macy’s. A woman who cuts the borders to length ensures that matching panels are being produced at the same time.

After putting the final stitching on a panel, a worker strides to a rack about 10 feet away, picks up the matching border and places them together in a cart.

Each bed is completed in four hours, down from 21, because there’s less wasted time between production stages, and median delivery times have been cut to 60 hours from 72. Plants have cut their raw-material inventories by 50% to 16 days’ worth. By eliminating thousands of square feet of “work in process” — piles of partly finished beds — and moving workers closer together, the Williamsport facility last year freed enough space to combine two shifts, slicing costs.

Companywide, Sealy has reduced its workforce by 30% in five years through attrition and temporary staff cuts, Hofmann says. It now employs far fewer material handlers. Productivity is up 50%.

The shift by Sealy and others represents a new perspective. For nearly a century, manufacturers believed that cranking out hundreds or thousands of parts then shifting the load to the next worker was most efficient. It ensured makers never ran out of parts or finished goods. And it minimized equipment changeovers to make different parts that could take hours or even days.

Yet along with forcing companies to carry too much inventory, the strategy yields a high rate of defects: A worker down the line finds a flaw only after hundreds of tainted parts had been made, Sharma says.

(Hat tip to Bill Waddell.)